On October 1, 2014, CST completed the GP Purchase and IDR Purchase for $17
million in cash and approximately 2 million shares of CST common stock for aggregate
consideration of approximately $90 million. On August 21, 2016, CST, the owner
of our General Partner, entered into the Merger Agreement. As a result, Circle
K Stores Inc., a subsidiary of Couche-Tard, will, through its acquisition of
CST, control CST’s interest in the General Partner and CST’s 19.8%
limited partner interest in CrossAmerica as well as all of the IDRs. The Merger
was approved by CST’s stockholders on November 16, 2016 and is subject
to the receipt of regulatory approvals in the United States and Canada. The
Merger is currently expected to close in the second quarter of 2017. The General
Partner manages the operations and activities of CrossAmerica. The General Partner
is managed and operated by the Board and executive officers of the General Partner.
As a result of the GP Purchase, CST controls the General Partner and has the
right to appoint all members of the Board. Therefore, CST controls the operations
and activities of CrossAmerica even though CST does not own a majority of our
outstanding limited partner units.
We conduct our business through two operating segments, Wholesale and Retail.
As of December 31, 2016, we distributed motor fuel to nearly 1,200 sites located
in 29 states (Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Illinois,
Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania,
Rhode Island, South Dakota, Tennessee, Texas, Virginia, West Virginia and Wisconsin).
We are one of the ten largest independent distributors by volume in the United
States for ExxonMobil, BP and Motiva (Shell), and we also distribute Chevron,
Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66-branded motor fuels (approximately
83% of the motor fuel we distributed during 2016 was branded). We receive a
fixed mark-up per gallon on approximately 87% of gallons sold to our customers.
The remaining gallons are primarily DTW priced contracts with our customers.
These contracts provide for variable, market based pricing. An increase in DTW
gross profit results from the acquisition cost of wholesale motor fuel declining
at a faster rate as compared to the rate retail motor fuel prices decline. Conversely,
our DTW motor fuel gross profit declines when the cost of wholesale motor fuel
increases at a faster rate as compared to the rate retail motor fuel prices
increase.
We own or lease and operate retail sites. Subsequent to an acquisition, we
evaluate the eventual long-term operation of each retail site acquired: (a)
to be converted into a lessee dealer or (b) other strategic alternatives, including
divestiture or longer term operation as a retail site. By converting retail
sites into lessee dealers, we continue to benefit from motor fuel distribution
volumes as well as rental income from lease or sublease arrangements while reducing
operating expenses. For the year ended December 31, 2016, we converted 77 company
operated retail sites in our Retail segment to lessee dealers in our Wholesale
segment.
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